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Archive for August, 2011

Last year I blogged on the case of merchandising in Kenya, noting that while clubs such as Arsenal undoubtedly had a presence there, there was little sign of any commercial activity which they were benefiting from. This summer’s trip to Morocco revealed a significantly different situation.

The overall impression of the top European clubs’ ‘presence’ is summed up in this graffito from Agadir:

And not necessarily in that order! What of course was not clear was whether the author was a Moroccan or a Spanish tourist. One suspects naturally the former as presumably a Spanish tourist is unlikely to have promoted both teams.

Certainly the sale of shirts and other merchandising was aimed at both residents and tourists.

[You can click on each of the images for an enlargement;
these four photos are from the souk in Marrakesh]

Observation would suggest that these items are largely aimed at tourists. For Moroccans there was really only one shirt of choice – a Barca shirt, with in particular a skew towards Lionel Messi, and indeed all items Barca, official or otherwise.

Moroccan national team shirts were popular (but significantly less so than Barcelona shirts). Although I spotted a couple of Arsenal shirts, and a single Rooney Manchester United shirt, the English Premier League was notable by its near absence. Which raises the interesting question of ‘why?’.

Sadly I was unable to obtain a Moroccan equivalent of the Radio Times, but it seems likely that Moroccans have better access to La Liga matches than to Premier League ones. It strikes me that Morocco is now a lost cause in the Premier League’s attempts at global merchandising hegemony. Could it be that pushing up the price of broadcasting rights to their perceived maximum is actually going to prevent any Premier League clubs becoming truly ‘global brands’? Once La Liga, Serie A or the Bundesliga has established itself as the league of choice in a particular country, I suspect it will be very hard to supplant.

And finally a promised mention of someone I met – Ken, a Welshman who lives in North London and is more than willing to spread the word:

A couple of postings back (see Chester revisited) I threatened some more thoughts on my revisiting the Report of the Committee on Football, aka The Chester Report, published in 1968. This is the first of two, and focuses on how the funding of clubs by fans has changed in the past 40+ years.

Today clubs have three main revenue streams – broadcasting rights (effectively non-existent in the sixties), commercial revenues through sponsorship (banned in the sixties, in spite of Jimmy Hill’s attempts to get the Talbot logo onto Coventry City’s shirts) and merchandising (then as unimaginable as being allowed to buy a School First Team or Prefect’s tie if you weren’t entitled to it – shirts were only fit to grace the backs of players), and direct revenues through ticketing, and to a lesser extent matchday programmes. Among the direct revenues in those days were donations from supporters clubs – a to-a-large-extent, although certainly not entirely, forgotten form of fans financing clubs.

Chester was able to write back then:

The financial position of a club is determined by several factors: gate receipts in relation to operating expenses (players’ wages, administration etc.); contributions from supporters clubs, sweepstakes etc.; transfer fees; and distributions from the Football League and the Football Association.

The order in which the factors are listed is interesting, and to some extent implies their significance. Under the heading ‘Miscellaneous Income (including Supporters’ Club contribution‘, the Chester Report states (and it’s worth quoting the full text):

Most clubs obtain a good deal of money from the operation of sweepstakes, bingo, raffles, and a variety of “gambling” devices [sic]. These are sometimes run by the club or a body directly under its control, but more often they are run by the Supporters’ club. From the published accounts (which by no means tell the full story) income of this kind totalled £4¼ million and provided over90 per cent of all additional funds to League clubs in 1963-1966. Its significance varied in different leagues. It was least important, absolutely and relatively, in the First Division. In the Third Division, however, it compensated for some 80 per cent of gross operating deficits in 1963-1966 and for roughly two thirds of such deficits in the Fourth Division. Indeed these two lower divisions, where team and administrative expenses and wages alone exceed total gate receipts, could not have been sustained without money from this source. The total in the Third and Fourth Divisions during these three seasons alone was £2¼ million as against gate receipts of some £5 million. In other words, Supporters’ clubs, bingo etc. contributed in the ratio of nearly £1 to every £2 taken at the gate. In addition such clubs may make contributions to the well-being of their football clubs which do not appear in the accounts, e.g. the improving of terracing and ground facilities.

The importance of Supporters’ clubs for the financial survival of the lower division clubs , quite apart from their social role in canalising the deep attachment which many supporters feel for their local clubs, cannot be exaggerated. It is most disturbing therefore, that these contributions were on a slightly declining trend in Divisions 2, 3 and 4 during 1963-66. Should this trend ever become more pronounced, the financial viability of many of the lower clubs would be in serious doubt.

(To allow for inflation and look at these figures by today’s standards in terms of changes in average earnings, 1968 figures should be multiplied by a little over 25.)

The importance of donations from Supporters’ Clubs is echoed in another report from the same era. The Political and Economic Planning (PEP) report English Professional Football of June 1966 notes: “Probably only four or five First Division clubs depend on [donations from Supporters Clubs] to a marked degree, yet in the lower divisions many clubs would be unable to exist unless these funds were forthcoming. During 1964-5 in at least five League clubs, supporters’ donations represented some 60 per cent of the parent club’s total income.” I find that staggering, especially when viewed from today’s perspective. Unfortunately the report does not name the five clubs.

There are of course, especially in lower Leagues, some clubs today where the income directly from fans is a key element in the club’s budget. What is different from the sixties though is that fans would not be prepared to simply subsidise a club owned by a ‘benefactor’ (or maybe in some cases they would and do) without some say in how the club was run.

Direct financial support of a club by a fan today includes the purchasing of endless variants of shirts. Does it actually matter if this revenue stream has replaced donations through a Supporters’ Club? I would argue very strongly that it does. At least if the donation was through a Supporters’ Club, fans had a strong voice, if no significant power. By seeing income shift from Supporter’s Club donations to the sale of shirts, the fans’ voice has been effectively individualised and thus virtually silenced. Well-intentioned though recent boycotts of merchandising have been, they have had relatively little impact on club boards.

To regain a voice, and gain a say in how their club is run, fans need to gain stakeholder power through share ownership. The next time you contemplate spending £40 on the new alternative away shirt, or for some reason feel embarrassed by wearing a shirt with last year’s sponsor’s logo (personally I’m embarassed at wearing any sponsor’s logo – remember, I’m a Pompey fan, and not so long ago we were, for some inexplicable reason, sponsored by Ty, the manufacturer of Beanie Babies), consider the option of instead donating £40 to your Supporters’ Trust war-chest!

Things looked slightly better than in the previous season in simple terms of the number of insolvency events I have logged – ten events involving nine clubs, compared to twelve events each at a different club in the previous season – although there were still some large clubs involved. In 2009/10 we had seen Crystal Palace, Portsmouth, and Chester City crash financially; in 2010/11 it was the turn of Plymouth Argyle and Rushden & Diamonds, the latter disappearing and the fate of the former hanging on a knife-edge as I write (there is clearly no cause for celebration when a) no money has actually been paid, b) the Football League has yet to agree the Golden Share being passed on, and c) the prospective owner of the club is facing three charges of fraud at another football club in four weeks time (1 and postings passim)).

In alphabetical order the clubs in 2010/11 which suffered what I include in my definition of insolvency event were:

Atherstone Town (Tier 8 )

The club had become dependent on the bank-rolling of Chairman Aidey Burr (2), who stood down in November 2009. By December 2010 the club was forced to announce their intention to withdraw from the Southern League Division One Central (3). They now play in the Midland Football Alliance.

Dawlish Town (Tier 9)

In March 2011 Chairman Dave Fenner stood down (4) because of work commitments. In July the club withdrew from the Western League (5) with debts of £60,000 owed to landlord Teignbridge District Council and brewery Carlsberg Tetley. The club faces a winding-up petition brought by the latter (6).

Eastwood Town (Tier 6)

An unusual case. The club has been on the rise since Rob Yung began a frenzy of financial doping, boasting “I personally pay the players’ wages and any other money that comes in from the fans through gate money and the like goes straight into the club” (7). No notion of Financial Fair Play there then. The club’s rise has been impeded by stadium restrictions, and Yung put the club up for sale for £1 (hence its inclusion in the list) (8). The good news is the club is debt free (but whether it is sustainable at its current level without Yung to feed its financial habit remains to be seen) and new owners are in place (9).

Gedling Town (x2) (Tier 10)

Another case of benefactor withdrawal, but with more serious consequences. Chairman Roly Ash had bankrolled the club for many years (10 and 11), but at the beginning of the season gave up, withdrawing the club from the East Midlands Counties Football League. In November new club officials were announced (12) but in June the club again withdrew from the League (13). A bizarre consequence is that each of the club’s players now has to pay the League £22 to cover the fine imposed on the defunct club! It would seem that there is a Football Debtors Rule too.

Hucknall Town (Tier 7)

Another oddity. The club has had a recent history of financial struggling, and matters suddenly came to a head in May when it was hit with a £75,000 VAT bill by HMRC. For a number of years, it emerged, the club had decided not to pay VAT on revenue items such as gate receipts (14). With a hefty helping hand, a significant part was paid off and an agreement reached over the balance (15). In the meantime the ownership structure has had to be drastically altered and the club has been forced back to amateur status (16).

Leyton (Tier 7)

After a period of troubled ownership (17), the club (not to be confused with better known neighbours Leyton Orient) withdrew from the Isthmian League because it could not pay its subscription. There was a mass exodus (18), and the club, London’s oldest, was formally dissolved in July (19).

Plymouth Argyle (Tier 3)

An ongoing can of worms that I don’t propose to reopen in the context of this round-up. I’ve covered the saga in postings passim, and it has been very well covered by twohundredpercent.

Rushden & Diamonds (Tier 5)

The club went into Administration in July (20) and effectively folded. Finances had gone from bad to worse since being taken over by Liam and Steve Beasant in December. A number of rumoured last-minute rescues failed to materialise, and a resurrection club is now under way (21). The club’s demise had a silver lining for Kettering, who, under pressure because their lease was coming to an end, have now moved into Nene Park (22).

I have mixed feelings about this. Certainly its good news for Kettering (which is roughly eight miles from Nene Park in Irthlingborough – the ‘Diamonds’ part being ‘Irthlingborough Diamonds’), and a rational case can be made for the Kettering, Wellingborough, Rushden and Irthlingborough area being ‘over-populated’ clubs. But football is not an entirely rational topic. A League club has been lost, and there are still questions to be answered about its rapid decline.

Windsor & Eton (Tier 7)

Another sad case. An indulgent benefactor failed to restrain an overly ambitious manager (23). By May 2010 debts had risen to £137,000, including £50,000 owed to HMRC (24). In spite of various reprieves, the club was eventually wound up at the beginning of February 2011 (25). A resurrection club, Windsor FC, has been formed (26).

Although there has been a small decrease in the number of insolvency events, it is worth noting that a number of clubs came perilously close to inclusion in the list – Hinckley United (27), Welling United (28), and Wrexham (29) for example.

While League clubs have shown a general trend towards better financial management and control over recent years, non-league clubs remain very vulnerable. Common factors ate benefactor-dependence followed by benefactor withdrawal, and tax payment issues. Clubs at the lower levels are being forced to seriously consider ‘downgrading’ to semi-professional and even amateur status. There is little evidence that these trends will change.

If readers spot any omissions, please let me know. I’m afraid last season’s monitoring was necessarily a tad inconsistent because of too many nights spent away for work in hotel rooms with dodgy internet connections.

As I write, Portsmouth still only have a squad of 16 (1). The first two matches of the season have seen just three subs on the bench – shades of last season, when at their opening game against Coventry there were four subs on the bench, and the squad was heavily dependent on youth players. Things might have been expected to be different with new Russian owners Convers Sports Initiatives (2) as one of the reasons they gave for selecting Portsmouth was “its potential to return to the Premier League“. Not that they haven’t splashed any cash – Fratton Park is at least to get a desperately needed £100,000 face-lift (3), and a new ‘megastore’ has been opened (4), although perhaps there was an indication of CSI’s propensity to speculate to accumulate in the announcement that “to mark the occasion of its opening, every customer will be given a free water bottle“.

Not that limited squad size is unknown to Portsmouth. By happenchance I recently came across the following, from 1967!

CUTTING THE COAT TO SUIT THE CLOTH

THE MUCH PUBLICISED FRATTON PARK STAFF REDUCTION TO JUST 18 PROFESSIONALS IS ONLY PART OF THE OVERALL PORTSMOUTH PLAN TO PAY THEIR WAY IN THE FOOTBALL WORLD.

Explains Secretary Mr. R. Mulcock: “It isn’t just the resultant wages saved, but overhead expenses like staff, hotels, travel have all been cut.

“Now we can pay our way from our gates, more or less, and that means that all our ancillary income from fund-raising schemes can go towards improving the team.”

They have a lively Supporters’ Club and new premises adjacent to the club offices at Fratton have just been opened. “Now our supporters can entertain their visitors in the way they are themselves are entertained away from home”, says Mr. Mulcock. “That’s the way we are trying to develop.”

“Modern football fans require amenities and we aim to give it to them.”

This comes from the official Football League Review of 18 March 1967, and was one of a series called ‘Club Call’ written by Harry Brown. The Review was distributed in match programmes for many years, but is sadly now defunct, although Steve Grant has made a sterling effort to revive its spirit online albeit unofficially.

On the opposite page is an interview with the then club manager, George Smith, and again it makes for similarly ironic reading to those who have followed Portsmouth’s ‘progress’ under the multitude of owners in the last fifteen years:

A more selective public will prune the clubs argues George Smith

A much more selective public, and the shortage of players, must inevitably change the face of League football in this country.

That’s the view of Portsmouth FC manager Mr. George Smith who says, frankly: “I can only see the game shrinking. The League is bound to get smaller”.

He justifies his views in this way: Gates at the top are getting bigger because the public want the big time, they want the drama, and they want comfort. Only the big boys can give them that.

“There will always be a place for clubs below the top, but some of the gate drops in the Third and Fourth Divisions do suggest that in many smaller towns bread and butter football isn’t enough. I’d be delighted to be proved wrong, but I can’t see how I will be”.

PLAYER SHORTAGE

There is a second platform to George Smith’s argument. Shortage of players. “In the old days there was a saying that if you called down a pit shaft a couple of footballers would come up. Today you’d get two lead guitarists.”

Mr. Smith argues that the end of the maximum wage, with which he agreed, has also meant that the star players have tended to move into the star clubs.

“These are all factors which make life difficult for the very small clubs, and economics [sic] of it can only mean that there must be a shrinkage in the number of League clubs”, he argues.

At Portsmouth, where they only run one team and the number of professionals employed has been cut to 18 they have already cut their coat to suit the cloth.

“This is no disadvantage”, says Mr. Smith. “We are taking a highly professional attitude. We are running a Football League club, and our job is to keep it that way. Clubs whose aim is to encourage football, no matter the economics of the job are, in my view, not facing realities.”

Some interesting food for thought there, not least its relevance today, and the irony. For at least a few years Portsmouth practised in part the financial prudence that Messrs. Smith and Mulcock had preached. They stayed up, in the old Division 2, until 1976, but there had been a change in ownership in 1972 and incoming owner John Deacon was unable to continue supporting the unsustainable business model they had slipped back into. In 1976 the club had to be rescued from imminent receivership by fans raising £35,000 (roughly £300,000 when adjusted to today in terms of average earnings) in the SOS Pompey scheme. By 1978 they were in the old Fourth Division.

Certainly any sense of financial prudence had disappeared by the nineties. Could it just be that CSI will bring a sense of financial prudence and stability back to the club? And, if they do, can they kiss goodbye to a return to the Premier League?